Economic History of the US Documents

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Intermediate Macro
08/24/2015
Economic Models: simplification of reality allows us to focus on
relevant factors that help us explain what we are trying to.
5 basic steps of building a model:
o 1) Identifying an aspect that we want to study
o 2) Endogenou

Quantity Theory of Money:
o
o
A simple theory linking the inflation rate to the growth rate of the money supply.
Begins with the concept of velocity
Velocity:
o
Basic concept: The rate at which money circulates
o
Definition: The number of times the avera

Categories of the Population:
o
Employed : Working at a paid job
o
Unemployed: Not employed but looking for a job
o
Labor Force: The amount of labor available for producing goods and services; all
employed plus unemployed persons
o
Not in the Labor Force

Intermediate Macro
08/24/2015
Economic Models: simplification of reality allows us to focus on
relevant factors that help us explain what we are trying to.
5 basic steps of building a model:
o 1) Identifying an aspect that we want to study
o 2) Endogenou

Origins of the Federal Reserve System
Resistance to establishment of a central bank
o
o
Fear of centralized power
Distrust of moneyed interests
No lender of last resort
o
o
Nationwide bank panics on a regular basis
Panic of 1907 so severe that the public

Chapter 20 Guide
The American Economy in WW1
-The war brought about fundamental changes in the domestic economy, in the role of
government, and in Americas position in the world economy.
- The suspension of Gold convertibility of the major European curren

In 1800, transportation is pretty much limited to the coast. A lot of desire to improve
transportation though. US is blessed with a really good river system. One of the problems
was that the rivers were really good until we hit the Appalachians which turn

In 1800, transportation is pretty much limited to the coast. A lot of desire to improve
transportation though. US is blessed with a really good river system. One of the problems
was that the rivers were really good until we hit the Appalachians which turn

Convergence Debate
The Convergence Debate
n
Japans example.
In the 1960s, income was only 35% of average U.S. income and it had a much smaller
capital stock.
Growth rate in the 1960s: > 9%. It slowdown in the 1970s and 1980s to 4%.
1990s: income was alrea

GNP vs. GDP
o
Gross National Product (GNP): Total income earned by the nations factors of
production, regardless of where located
o
Gross Domestic Product (GDP): Total income earned by domestically-located
factors of production, regardless of nationality

Gross Domestic Product (GDP): Expenditure and Income
Two definitions:
o
Total expenditure on domestically-produced
final goods and services.
o
Total income earned by domestically-located
factors of production.
Expenditure equals income because every dolla

Money Supply: Quantity of money available in economy
Monetary policy is the control over the money supply
Monetary policy is conducted by a countrys central bank.
The U.S. central bank is called the Federal Reserve (the Fed).
To control the money supply,